LOTTERY, GAMBLING, BETTING TAXABLE UNDER GST ACT

CONTEXT:
Recently, the Supreme Court (SC) has held that lottery, gambling and betting are taxable under the Goods and Services Tax (GST) Act, 2017.

BACKGROUND:

  • The SC passed the order in a batch of pleas filed by various lottery dealers who argued that the Central government had wrongfully classified lottery as goods.
  • Challenging Section 2 (52) of the 2017 Act and notifications levying tax on lottery, petitioners contended that the law was violative of the fundamental rights and contrary to the SC judgment (Sunrise Associates Vs. Government of NCT of Delhi 2006) that held that lotteries were merely actionable claims and cannot be defined as ‘goods’.

JUDGEMENT:

  • Lottery, betting and gambling are actionable claims and come within the definition of goods under Section 2 (52) of the Central Goods and Services Tax Act, 2017.
  • The levy of GST on lotteries does not amount to hostile discrimination.
  • As per Schedule III of CGST Act 2017, actionable claims other than lottery, betting and gambling are neither treated as supply of goods nor a supply of services.
  • The Parliament has an absolute power to go for an inclusive definition of the term ‘goods’ to include actionable claims like lottery, gambling and betting.
  • Article 246A of the Constitution fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2 (52) cannot be said to be not in accord with the constitutional provisions.

CLAIMS ON ACTION:

  • A claim to any debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of movable property.
  • Hypothecation occurs when an asset is pledged as collateral to secure a loan.
  • Only activities relating to lottery, betting and gambling are subject to GST and except these three, no actionable claim is covered under GST by virtue of Schedule III.

Examples

  • Insurance Policy which is not secured by way of mortgage or hypothecation or pledge.
  • Claim for arrear of rent is actionable claim since it is not secured on anything.
  • Right to claim provident fund.
  • Claim for unsecured debt.
  • Claim in profit by a partner in a firm.’

CENTRAL LAWS RELATED TO LOTTERY, GAMBLING AND BETTING:

  1. The Lotteries Regulation Act, 1998
  2. Indian Penal Code, 1860
  3. Prize Competitions Act, 1955
  4. Foreign Exchange Management Act, 1999
  5. Information Technology Rules, 2011
  6. Income Tax Act, 1961

SOURCE: ECONOMIC TIMES

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